IT firms may increase fee for clients to absorb US visa fee hike

It is expected that IT firms will be burdened by an extra $400 million per year due to the increase in visa fees.

January 12, 2016 15:25 IST

Indian IT firms are likely to increase the fee they charge clients to offset the impact from a hike in work visa fee in the US. Last month, the US government had increased the fee to $4,000 for H-1B visas and $4,500 for L-1 visas.

These temporary work permit visas allow companies to hire highly skilled workers from other countries when there is non-availability of such workers in the US.

IT firms will be burdened by an extra $400 million per year due to the increase in visa fees, as estimated by Nasscom.

"The higher fee is unjustified because it is designed to hurt Indian firms disproportionately. Immigration reform in general in the US is something that has to happen sooner or later," Reuters quoted R Chandrasekhar, president of Nasscom, as saying.

Starting from 1 April, 2016, the United States will wipe out 0.5-6% from the profit margins of IT companies such as Tata Consultancy Services (TCS) and Infosys.

"The higher visa fee is one of the headwinds, but they (the companies) can expect to recoup some of the costs through contract re-negotiations and a stronger dollar," said Aneesh Srivastava, Chief Investment officer at IDBI Federal Life Insurance.

TCS is expected to announce a 10% increase in its net profit for the December quarter, while Infosys is likely to report a 3% rise in net profit. Infosys, TCS and Wipro have stepped up their operations in digital and cloud computing services due to margin pressure in existing verticals from increased competition.

"These companies know that with digital services you can cut down the number of people that need to work out of client locations and that visa costs do not pose a long-term threat," Reuters quoted Srivastava, whose funds own Infosys and TCS shares, as saying.